Abstract
I was delighted to be asked to review this wonderful book by Gary Spraakman. Before I provide a more detailed review, two points are worthy of mention. First, in my own research I too study management accounting at mainly one company – the Guinness brewery in Dublin – but so far, the longest time span I have managed to cover is about 110 years (Quinn, 2014). In this book, Spraakman provides a reasonable level of detail of management accounting at the Hudson’s Bay Company (HBC) over a period of 335 years from 1670 to 2005. This is a wonderful achievement in itself, and, as Spraakman notes, “no other commercial company in the world has the ability to present so many management accounting documents” (p.5). Second, this book as part of the Studies in the Development of Accounting Thought series, not only provides an additional new volume to this respected series, but also provides the first volume dedicated to management accounting and the first volume to explore a single company. Having said that, the book stands alone as an excellent piece of work.
As Spraakman notes in the first chapter, he is quite lucky that the HBC is both still in existence and has an extensive and well-maintained archive. This has no doubt contributed to the production of this book. He also notes in the preface how a stop at a historic site on the way home from a family trip to Newfoundland revealed an old journal or ledger which made him curious. This was the start of the journey which resulted in this book, and several published papers I am familiar with. This reflects the ever-curious academic mind, which, as we know, does not shut down even when we are having a break. Thankfully, Spraakman’s mind was inspired that day and we now have this great book.
Now for some detail. Spraakman proposes that larger-scale management accounting change occurred at HBC five times during the 335 years covered by the book. He thus divides the book into five parts, each of which I now summarize. Part 1 (Chapters 2 and 3) covers the period 1670–1810 and describes the books of account maintained by HBC. The initial years saw mainly double entry bookkeeping, with management accounting techniques introduced about 1692. At this time, Spraakman details five separate management accounting techniques, which included the books of account within a double entry system. Some of the techniques were undoubtedly internally created by HBC and the five techniques worked to complement each other to deliver a profitable trade. One of the techniques, “outfits and indents”, equated to a budget for the trading year, which was necessary as barter goods like flour and guns had to be shipped from the United Kingdom in exchange for furs. Some scholars would argue that management accounting did not exist at this time (or was evolving in the pre-industrial revolution years), but this example is undoubtedly management accounting as it provided information for planning and decision-making.
Part 2 (Chapters 4 to 9) details management accounting from 1810 to 1870. These chapters provide a rich organizational context and demonstrates its effects on management accounting. The influences of Andrew Wedderburn (a HBC committee member), increasing competition and the merger with the North West Company are detailed. Changes to management accounting during this time included a move to the use of pounds sterling in accounting records (as opposed to “made beaver”) and the appointment of officers to HBC with the title of accountant. The influence of accounting developments in London is also noted.
Part 3 (Chapters 10 to 17) covers the period 1870 to 1930. Some scholars argue the latter part of this period, in particular after the First World War, was when what we might term modern-day management accounting came to fruition. These chapters seem to support this argument and detail an increasingly complex management accounting system within HBC. This system not only had to support changes in the company itself (entering the retail trade for example) but also create a system capable of satisfying increasing shareholder information demands. As detailed in Chapter 17, this included departmental accounts (with measured of profit) for each department in the retail stores to allow management to make decisions on items such as the size, location and layout of departments.
Part 4 (Chapters 18 to 20) details management accounting from 1930 to 2000. The influence of Philip Chester, a chartered accountant, is detailed in Chapter 18. His influence included the creation of four divisions in 1930 – retail, fur trade, land and wholesale. Chester also shortly after introduced a budgeting system and standardized reporting. The latter remained in place with few changes until 2005 according to Spraakman. Internal auditing and capital budgeting were also introduced in the 1930s.
Part 5 (Chapters 21 to 23) brings the story thus far to a head, covering the period 2000 to 2005. While detailing some changes to management accounting, the key message of Chapter 21 is that the management accounting techniques at the turn of the twenty-first century had been in place for about seventy years. These techniques were subject to an “information technology invasion” during this period. The technology effects were two-fold and have been reported in contemporary literature – automation of repetitive management accounting tasks and automation of some operational tasks (such as recording of sales). While technology did improve the management accounting information – for example, improved data allowed for product-line reporting – Spraakman suggests that HBC did not embrace technology enough within its strategy. Other firms like Walmart did. His closing comments suggest that the management accountants were deficient in information technology skills. Sadly, I believe this is still the case ten years after the end-time of Spraakman’s analysis of HBC.
To sum up, what I find most interesting about this book is a central but subtle theme, that management accounting at HBC has been relatively stable, with some changes, over a long time period. The final chapter briefly introduces the notion of institutionalization of management accounting and draws on some insights from Burns and Scapens (2000). Using these insights, Spraakman briefly details how some internal and external influences (during the five periods) caused existing management accounting to change and become re-institutionalized. At the same time, some underlying techniques remained – for example, some form of budgeting technique was present during the entire period. The extensive timeframe of the study also adds weight to the arguments put forward by Burns and Scapens (2000) on management accounting change being gradual and evolving over time.
I enjoyed the book so much, it is hard to be critical. I do however have two very minor comments. First, as one of my kids says about most of the stuff I read, “it’s got no pictures”, and this book is no exception. This may of course be a permissions issue, or possibly a style issue on behalf of the publishers, but with present-day technology I really would have liked to see some images of early accounting books and records from HBC. It may also be our own fault as academics, trying to be too serious and forgetting to use images or similar to tell a good story – and the story of management accounting in HBC over 335 years is a good story worth telling. Second, the book could incorporate more references to other works on management accounting history over the time period, particularly the earlier and middle periods. Having said that, this work can be done by others in the future now that we have this book to draw on.